The six challenges of CIL
The strong and clear message from the Localism Bill is that local authorities who are serious about delivering infrastructure and supporting their neighbourhoods will need to develop a Community Infrastructure Levy (CIL) - and do so swiftly.
We have seen a sudden step change in local authorities urgently wanting to have a CIL charging evidence base prepared and their CIL charging schedule examined and in place by 2014. It is no coincidence that this is the cut-off date when restrictions on the use of pooled Section 106 Developer Contributions kick in.
What are the challenges facing local authorities seeking to develop CIL charges in their areas?
Challenge 1: Developer challenge relates to S106 Contributions
The potential for developer challenges faces local authorities in this early transition stage. As part of the 2010 CIL Regulations, the S106 charge is now a statutory requirement and must meet the tests of being necessary, directly related to the development, and fair and reasonably related in scale. There have been a number of appeals where Inspectors have specifically looked at developer contributions and questioned the relationship to the development.Challenge 2: CIL transition deadline is fast approaching
Those local authorities who are serious about securing CIL contributions towards strategic infrastructure costs, will, after April 2014, need to have a CIL in place. After this date, no more than five developer contributions can be pooled per infrastructure item (and this list of five will include any agreements commenced from 6 April 2010). For many local authorities there is simply no staff capacity or resource to deal with the evidence requirements to prepare a CIL charging schedule within this tight timescale. Local authorities will need to prioritise, and identify some existing S106 requirements that need to be strengthened in the short term until resources permit to undertake a CIL (if they choose to do this). Many authorities are beginning to appreciate that there is scope for charging authorities to reclaim the cost of set up (including consultancy) from the CIL charge itself.Challenge 3: Striking the right balance between levy and economic delivery
The CIL guidance so far affords considerable flexibility and freedom for each local authority to develop a charging schedule that best meets locally specific requirements. However, the flip side of this flexibility is that there is little guidance on ‘how to do it’ as with other evidence requirements, e.g. Strategic Housing Land Availability Assessments. There is considerable flexibility in varying charges by area and/or by use, but the more complicated this is the more evidence is required. This will in turn need to be defended during at examination. An important guiding principle from DCLG is to keep the charging schedule simple and undertake viability assessment at a broad level.
Challenge 4: What is meant by ‘meaningful contribution’ for neighbourhood funding?The requirement to ensure that there will be a meaningful contribution for neighbourhood funding raises various questions: what is meaningful, who will administer it, do we include present or future communities and how will this money be used? There will be further consultation on this later on in the summer, after which more details may emerge to guide the charge preparations. In the meantime, those authorities currently working on CIL or Infrastructure Delivery Plans could gauge community expectations.Challenge 5: Issues surrounding infrastructure levy spend There are a number of questions relating to whether the CIL income generated from new growth will actually be spent to meet the infrastructure requirements stemming from that growth. One would be forgiven for thinking that there would be a requirement for some linkage between the CIL Charging Schedule and the Relevant Infrastructure List (commonly known as the Regs 123 list). However, there is no statutory requirement to link the non obligatory ‘Relevant infrastructure list (Regs 123 list)’ with the charging schedule. On the one hand, this provides much needed flexibility to respond to changes in development planning. However, it also removes certainty for service providers and developers that certain strategic infrastructure will be funded by the levy – increasing the potential for poor infrastructure delivery and economic impacts.
Challenge 6: Longer term Sub-Regional Economic Growth could be affected
Some of their infrastructure requirements in major cities stem from economic growth of the sub area or region. Two-tier authorities may face similar issues. Yet unless ‘agreement is reached’ by the sub region and charging authorities, there is no requirement in CIL legislation (unlike the Greater London Authority transport charge) to pay for the strategic infrastructure from the CIL collected by the individual charging authorities. This could leave sub regional infrastructure planning highly vulnerable and longer term affect the economic growth of the wider area.
This is a good reason for the need to cooperate locally and ensure there is a strong infrastructure delivery vehicle in place. Could this be a role for the Local Enterprise Partnership, supported by sub regional service providers and local authorities? Such a delivery vehicle could be used as a mechanism for prioritising strategic sub regional infrastructure requirements, costs and funding from the levy.
The future for CIL?It is understood that the request to be part of the CIL front runner scheme was oversubscribed, and Front Runner 2 has just been launched. We also know that a number of local authorities recognise the need to develop a CIL due to the announcements from the Localism Bill that CIL is indeed here to stay and being strengthened. However, resource constraints on infrastructure planning and the lack of in-house skills to understand economic viability may hamper many from proceeding soon with a CIL charge.
Click here to learn more about our portfolio of toolkits for CIL and infrastructure planning.